The last few days have been quite bumpy for the crypto market. Most coins in the top 100 list are in the red over the last 7 days and the global crypto market cap has also taken a hit, falling below the $1 trillion mark for the first time in nearly two months. However, we could see increased volatility in the coming days, with three big developments expected by the end of the month. The crypto market could drop further or register a comeback, depending on how these events pan out. But what are these developments and how will they affect the crypto market? Tag along to find out.
Federal Reserve hints at increased interest rates in March
The Federal Reserve is set for its 9th rate hike in a row since it began raising interest rates last March. As of February 2, 2023, the Fed interest rate stood at 4.75 percent, after a raise of 25 basis points. Though the current federal funds rate is at its highest in decades, another hike in interest rates is expected, and it could be higher than previously anticipated.
Here's a little context: The Fed has been aggressively raising rates to catch up on record-high inflation which has impacted not only the value of stock and equities but also crypto assets. The Federal Reserve raised rates by 75 basis points four consecutive times last year, but slowed to 50 basis points in December, followed by 25 basis points in early February.
With the Fed slowing the pace of its interest rate hikes in December 2022, Bitcoin and other cryptocurrencies spiked in value. Bitcoin soared from $16,953 to $18,103 just after the announcement on December 14, 2022. It was a similar story in Feb when the Fed further slowed the pace of its interest rate hikes. BTC jumped from $23,016 on February 1 to $24,061 on February 3.
Going forward, most crypto investors and traders expected even lower interest rate hikes. This would help further boost the crypto market. However, recent data shows stubborn inflation which has not weakened as expected even after consistent rate hikes. With this in mind, the Federal Reserve Chair, Jerome Powell, on Tuesday said that the US central bank was likely to raise rates higher than expected.
Powell, in statements before the Senate Banking Committee, said that "The process of getting inflation back down to 2 percent has a long way to go and is likely to be bumpy." He added, "The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated."
This statement alone was enough to send crypto prices on the decline. Already reeling from the Silvergate fiasco, BTC slipped below the $22,000 mark after Powell hinted at a higher-than-expected interest rate hike. The Federal Open Market Committee (FOMC) is scheduled to meet on March 21 and 22 to decide and announce the revised interest rates.
Shibarium blockchain is set to release its beta version this week
The much-awaited Shiba Inu layer-2 blockchain Shibarium is launching its beta version this week, approaching another milestone for the Shiba Inu ecosystem. After being touted as a mere memecoin, it has positioned itself as a serious project by offering the SHIB community to access cheaper and faster transactions. With its own DApp ecosystem and blockchain network, the beta launch will reduce bottlenecks with data and scaling which will contribute to strong fundamentals for the Shiba Inu community.
The upcoming launch of the beta version is in the testing stage, but if successful, the Shibarium’s Layer 2 blockchain protocols intend to focus on Web3 innovations such as metaverse and gaming. The expansion of its ecosystem also indicates that Shibarium can throw open doors to collaborate with high-profile companies and establish relationships with businesses to push Shiba Inu towards wider adoption.
Lead developer of Shiba Inu, Shytoshi Kusama said that the Shibarium will ultimately increase the adoption of the SHIB token and build its reputation as a more serious project. As such, the recent announcement resulted in a spike in the prices of Shiba Inu tokens. Other Shiba Inu ecosystem tokens also reflected positive price movements after the confirmation of the beta version. Therefore, the successful launch of Shibarium could result in a spike for SHIB and other tokens in the Shiba Inu ecosystem.
Ripple SEC lawsuit approaching its finale
The ruling of the SEC lawsuit against Ripple is expected to be produced any time now. The most vocal advocate of Ripple, John Deaton believes that Judge Torres has no way left to delay judgment any further and hinted that the verdict would be out in the open soon. Even Ripple’s Chief Legal Officer, Stuart Alderoty, believes the verdict in the longstanding case is just around the corner. Speaking with Blockworks, Alderoty said the verdict could be out “as soon as the end of this month.”
The dispute began when the SEC alleged in 2020 that Ripple and its executives sold XRP to inventors without registering it as a security. On the other hand, Ripple denied it by saying that the token should not be considered security in the first place. Now, after more than 2 years, the lawsuit seems to be approaching its final round. The judgment is considered a crucial precedent for the crypto market at large. A win for Ripple will be a remarkable feat for not only the company but everyone in the crypto community. However, a verdict skewed in favour of the SEC could further tighten the grip of regulatory authorities over crypto and will give a nod to go after companies dealing with digital assets.
The court could either produce a judgment favouring Ripple or SEC, avoiding a trial. If the ruling fails to come in favour of any, then the lawsuit will eventually be sent to trial. Regardless, the crypto sector is waiting in anticipation of this ruling as it can be a pivotal change or a major correction for the industry.
Conclusion
Another big development coming in the next couple of weeks is the Shanghai Upgrade. It will allow users to withdraw their staked ETH which has long been locked with the protocol. This could cause ETH to spike. It could also create buoyancy for Lido, Rocket Pool, and other staking solutions.
However, the crypto market is highly volatile. It can fluctuate wildly in a matter of minutes and is known to move against the strongest developments and indicators. Therefore, it is extremely important to do your own research and invest only as much as you can afford to lose completely.
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